May Ltd produces a single product for which the following data are given:

Standards per unit of product:

Actual details for given financial period:

There was no work in progress at the beginning or end of the period.

Required:

(a) Calculate the following variances:

(i)direct labour total;

(ii) direct labour rate;

(iii)direct labour efficiency;

(iv)direct materials total;

(v) direct materials price, based on issues to production;

(vi)direct materials usage.

(b)Discuss whether in each of the followingcases, the comment given as the possible reason for the variance, isconsistent with the variance you have calculated in (a) above.

(i)Direct labour rate variance: the union negotiated wage increase was $0.60 per hour lower than expected;

(ii) Direct labour efficiency variance: the efficiency of labour was commendable.

(iii)Direct materials price variance:the procurement manager has ignored the economic order quantity and, byobtaining bulk quantities, has purchased material at less than thestandard price;

(iv)Direct materials usage variance: material losses in production were less than had been allowed for in the standard;
 
 

Direct material Direct labour 4 kg at $3 per kg 2 hours at $6.40 per hour